Royal Bank of Scotland

Baroness Laing of Elderslie Excerpts

Thursday 5th November 2015 Commons Chamber

[Several hon. Members rose—]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. We have had plenty of time for this debate so I did not even suggest a time limit, thinking most Members would take approximately 10 minutes, but some, by taking a lot of interventions and having a lively debate, have taken considerably longer. I do not want to have to put on a time limit at this point on a Thursday afternoon, but it would be greatly appreciated if Members would take seven to eight minutes or less, because then everybody who wishes to speak in this and the next debate will have an opportunity to do so.

--- Later in debate ---

[Several hon. Members rose—]

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Asking Members to speak briefly clearly does not work. I often say that it is a test of oratory: the shorter a speech, the more effective it can be. Let us try again with Mr Douglas Carswell.

--- Later in debate ---

[Helen Goodman]

He has only just come in.

[Madam Deputy Speaker]

Order. If the hon. Gentleman had only just come in, I would not be calling him to speak. It is very kind of the hon. Lady to offer advice from a sedentary position, but it is not appropriate. I call Mr Carswell.

[Mr Carswell]

I congratulate the hon. Member for Edmonton (Kate Osamor) on securing this debate. She spoke incredibly eloquently—well done.

I am afraid that I cannot support the motion as it is far too prescriptive. It presumes to know what shape banks should take in the future. The German regional banking model, of which much has been said, could well be the future, but I am not sure that even Germany will necessarily have a German model of banking in 10, 15 or 20 years’ time. Equally, new technology might mean that we are able to do many of the things that banks currently do using platforms, which do not come with costly bonuses and buildings.

I very much favour the idea in the motion of a new model of banking. Since 2007, there has not been significant reform. Almost nothing has been done to rein in the worst excesses of fractional-reserve banking. It is this ability to conjure credit out of nothing that creates chronic malinvestment and credit bubbles in the wider economy and makes banks intrinsically unstable and in need of bail-outs—incidentally, I have consistently opposed those bail-outs.

In my paper “After Osbrown”—I do not intend to rehearse all the arguments on this occasion—I outlined the new model banking that I wished to see. After the Osbrown monetary and banking consensus has failed, and been seen to have failed, we will need change, but neither nationalising the banking system and the money supply nor imposing grand designs on the nature of banks, regional or mutual, are the answers. Claims that we need more retail banks as they are supposedly a safer bet than investment banks need to be taken with a large pinch of salt given that it was Northern Rock, a retail bank, that failed. I suspect that we will see dramatic change in financial intermediation and in the nature of money itself.

At the heart of the capitalist system is capital allocation, which does not use the pricing mechanism to allocate capital. That inconsistency cannot last much longer. We need fundamental reform to break up cartel banking. We must break up the cosy cartel presided over by central banks. We need to unwind quantitative easing, which is a subsidy for bankers. Thankfully, that will come about not as a result of politicians, House of Commons motions or ministerial insights, but because of technological change. Holding on to RBS shares will do nothing but hold up the changes that technology and market forces need to bring about.